Crafty Michigan Credit Unions Implement A Lottery Worth Playing
Save to Win gives Michigan residents the chance to win the lottery simply by purchasing a certificate of deposit. Here's how it works: residents who contribute at least $25 into a Save to Win CD are automatically entered into monthly drawings for a $400 raffle, and an annual drawing for a $100,000 jackpot. Even if you don't win, you still have an interest bearing CD.
This unusual CD is federally guaranteed by the National Credit Union Administration and pays between 1% and 1.5% annual interest, a bit lower than conventional rates. In 25 weeks, the program has attracted about $3.1 million in new deposits, often from people who have never been able to set money aside.
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People love to gamble and hate to save. With Save to Win, says Communicating Arts Credit Union President Hank Hubbard, "You are sort of betting, but there's no losing." If we are to become a nation of savers again, we will need more innovations like this — and the regulatory flexibility to allow them.
The program, developed by a Harvard Business School professor, is aimed at people who have trouble working out probabilities and wouldn't otherwise have a CD. What do you think? If the program was expanded beyond eight Michigan credit unions and offered a better interest rate, is this a type of gambling you could get behind?
Using the Lottery Effect to Make People Save [The Wall Street Journal via Freakonomics]
(Photo: Jeremy Brooks)
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Comments:
It's a little like the Premium Bonds we have in the UK - except that the deposits earn interest. Is the 1% typical of a CD, or is it reduced slightly due to the big cash prize?
as someone who doesn't participate in the lottery, this is a pretty interesting concept. i can see the appeal it would have towards people who do use the lottery, and if expanded the winnings would be higher and the appeal would be greater.
my only concern is the impact a bank/cu controlled lottery like this would have on state lottery systems. i'd hate to see Florida Bright Futures dry up because of a switch to a private lottery, even if it makes more sense to do so.
@nicksterv: Yes, it's a bit low. Bankrate.com says the national average is 1.88% and with a a bit of shopping you can find even better deals
@panzerschreck1: i think people who are already going to buy lottery tickets are potentially more likely to do BOTH this and keep buying lottery tickets. and people who wouldn't normally buy lottery tickets might also invest in this program
This sounds like an awesome program. Hear that credit unions around Chicago?!
(and I know better than to bother asking Chase, haha...)
I like it too. Hacking people's brains to get them to do something responsible they wouldn't otherwise do is cool!
1 - 1.5 percent interest? For a credit union? I'm getting 3.83 from my credit union. Sure I don't have a fancy lottery program, but I can withdraw money penalty free the first five days of every quarter, or deposit money anytime I want.
Florida Bright Futures is already drying up due to the incredibly low standards of the program. It doesn't even cover full tuition today because you have too many people getting a scholarship with no merit.
Putting money in CD's is losing it. You are better off investing in other forms. The low interest rate isn't even above the assumed 3% years (even with today's deflation set to 1.43% so far in the year it's hardly any profit made). Find other ways of investing...even paying off big APR credit cards will result in more money each month (if that isn't' a current option call your credit card company, they may be able to lower your interest rates, mine has a periodical review every trimester to see if you're eligible for a lower APR).
When I say other investments, avoid placing your money in the stock market in that group. Unless you REALLY know what you are doing and how it works you're just speculating, the same as gambling. People go to Vegas for that, only a few will make it big, most lose their money. Otherwise, casinos would not be able to stay open.
I think this sounds like a good promotion - but heck, if it was less - like in a drawing for $50 or even $25 monthly prize, and even a $100 or $250 annual prize would probable get me to through some of my savings account money in one or a few $25 CDs
@spenc938: It may have something to do with the size of the memberships. I don't what your home town does, but here in Lansing, credit unions are fairly popular. Local and state employees of all types have memberships with the various unions.
It's a great idea. If I had to choose between otherwise comparable CDs, I'd choose this.
stealing their interest instead of their money. This is a great and much more fair idea than a regular lottery, which only makes the poor poorer.
I think it's great. It seems to induce people to save, while giving them a chance to win some money on the side. That's $3.1 million that wouldn't have been saved otherwise, earning interest. Great innovation.